CITY OF MARSHALLTOWN, IOWA

Transcription

1 CITY OF MARSHALLTOWN, IOWA COMPREHENSIVE ANNUAL FINANCIAL REPORT Year Ended June 30, 2004 Prepared by: City Finance Department

2 Table of Contents Page INTRODUCTORY SECTION Letter of Transmittal 1-8 Certificate of Achievement for Excellence in Financial Reporting 9 Organizational Chart 10 Officials 11 FINANCIAL SECTION Independent Auditor's Report Management's Discussion and Analysis Basic Financial Statements Government-wide Financial Statements Statement of Net Assets Statement of Activities 30 Fund Financial Statements Balance Sheet - Governmental Funds 31 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets 32 Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds 33 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities 34 Statement of Net Assets - Proprietary Funds Statement of Revenues, Expenses, and Changes in Fund Net Assets - Proprietary Funds 37 Statement of Cash Flows - Proprietary Funds Statement of Fiduciary Net Assets - Fiduciary Funds 40 Statement of Changes in Fiduciary Net Assets - Fiduciary Funds 41 Notes to the Financial Statements Required Supplementary Information Marshalltown Water Works Supplemental Retirement Pension System 66 Budgetary Comparison Schedule (Budgetary Basis) General Fund 67 Road Use Tax Fund 68 HUD Programs Fund 69 Local Option Sales Tax Fund 70 Property Tax Fund 71 Notes to Required Supplementary Information - Budgetary Reporting 72 Supplementary Information Nonmajor Governmental Funds Combining Balance Sheet - Nonmajor Govermental Funds 73 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Nonmajor Governmental Funds 74

3 Table of Contents Page FINANCIAL SECTION (continued) Supplementary Information (continued) Nonmajor Enterprise Funds Combining Statement of Net Assets - Nonmajor Enterprise Funds 75 Combining Statement of Revenues, Expenses, and Changes in Fund Net Assets - Nonmajor Enterprise Funds 76 Combining Statement of Cash Flows - Nonmajor Enterprise Funds Internal Service Funds Combining Statement of Net Assets - Internal Service Funds 79 Combining Statement of Revenues, Expenses, and Changes in Fund Net Assets - Internal Service Funds 80 Combining Statement of Cash Flows - Internal Service Funds 81 Fiduciary Funds Combining Statement of Changes in Assets and Liabilities - All Agency Funds 82 Long-Term Debt Schedule of Bond Maturities STATISTICAL SECTION (Unaudited) Government-wide Expenses by Function 87 Government-wide Revenues - Primary Government 88 General Governmental Expenditures by Function - General, Special Revenue, and Debt Service Funds 89 General Governmental Expenditures and Transfers by Function - General, Special Revenue, and Debt Service Funds 89 General Governmental Revenue and Transfers by Source - General, Special Revenue, and Debt Service Funds 90 General Governmental Tax Revenues by Source 91 Property Tax Revenue by Function 92 Property Tax Levies and Collections 93 Assessed Actual Value of Taxable Property 93 Tax Rates - Direct and Overlapping Governments 94 Principal Taxpayers 95 Special Assessments Collections 96 Ratio of General Bonded Debt to Assessed Value and General Bonded Debt Per Capita 97 Ratio of Annual Debt Service Expenditures for General Debt to Total General Expenditures - General, Special Revenue, and Debt Service Funds 98 Computation of Direct and Overlapping Debt 98 Revenue Bond Coverage 99 Demographic Statistics 100 Property Value, Building Permits, and Bank Deposits 101 Insurance in Force - Primary Government Only 102 Principal Employers 103 Salaries of Principal Officials 104 Miscellaneous Statistical Data

4 Table of Contents Page STATISTICAL SECTION (Unaudited) (continued) Water Pollution Control Historic Earnings 108 Historic Coverage 108 Number of Customers by Type 109 Present Net Assets 109 Major Users 109 COMPLIANCE SECTION Report on Compliance and Other Matters and on Internal Control Over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Report on Compliance with Requirements Applicable to Each Major Program and on Internal Control Over Compliance in Accordance with OMB Circular A Schedule of Expenditures of Federal Awards Notes to the Schedule of Expenditures of Federal Awards 116 Schedule of Findings and Questioned Costs

5 INTRODUCTORY SECTION

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15 City of Marshalltown, Iowa Organizational Chart As of November 2,

16 OFFICIALS JUNE 30, 2004 Name Title Term Expires Elected officials: Floyd Harthun Mayor December 31, 2005 Susan Malloy Mayor Pro-Tem December 31, 2005 John Cahill Council Member December 31, 2007 Robert Schubert Council Member December 31, 2005 Jeff Linton Council Member December 31, 2007 Eric Fruin Council Member December 31, 2005 Darrell Eaton Council Member December 31, 2005 Laurel Phipps Council Member December 31, 2007 Council-appointed officials: Dick Hierstein City Administrator October 30, 2005 City Administrator Appointment with Council Approval: Cindy R. Kendall Finance Director Indefinite Shari Coughenhour City Clerk Indefinite Duane Greenwood Public Works Director Indefinite Roger Nowadzky City Attorney Indefinite Mike Fields Water Pollution Control Director Indefinite Robert Workman Parks and Recreation Director Indefinite Larry Squiers Fire Chief Indefinite Lon Walker Police Chief Indefinite Mary Rund Technical Services Coordinator Indefinite Mary Schrader Housing Director Indefinite John Phillips Public Facilities Superintendent Indefinite 11

17 FINANCIAL SECTION

18 INDEPENDENT AUDITOR S REPORT To the Honorable Mayor and Members of the City Council City of Marshalltown, Iowa We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Marshalltown, Iowa, as of and for the year ended June 30, 2004, which collectively comprise the City s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the management of the City of Marshalltown. Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the Marshalltown Water Works and the Marshalltown Convention and Visitors Bureau. Those financial statements were audited by other auditors whose reports thereon have been furnished to us, and our opinion, insofar as it relates to the amounts included for the Marshalltown Water Works and the Marshalltown Convention and Visitors Bureau, is based on the reports of the other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America; Chapter 11 of the Code of Iowa; and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards and provisions require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The financial statements of the Marshalltown Convention and Visitors Bureau were not audited in accordance with Government Auditing Standards. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit and the reports of other auditors provide a reasonable basis for our opinions. In our opinion, based on our audit and the reports of other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Marshalltown, Iowa, as of June 30, 2004, and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. 12

19 In accordance with Government Auditing Standards, we have also issued our report dated November 2, 2004, on our consideration of the City s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. The management s discussion and analysis, pages 14 through 27, Marshalltown Water Works Supplemental Retirement Pension System Schedule, page 66, and budgetary comparison information on pages 67 through 72 are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. We and the other auditors have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the basic financial statements of the City of Marshalltown, Iowa. The introductory section, combining nonmajor fund financial statements, and statistical tables are presented for purposes of additional analysis and are not a required part of the basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non- Profit Organizations, and is also not a required part of the basic financial statements of the City of Marshalltown. The combining nonmajor fund financial statements and the schedule of expenditures of federal awards have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. The introductory section and statistical tables have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them. Dubuque, Iowa November 2,

20 Management s Discussion & Analysis (MD&A) As management of the City of Marshalltown, we offer readers of the City s financial statements this narrative overview and analysis of the financial activities of the City of Marshalltown for the fiscal year ended June 30, We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found on pages 1-8 of this report. In most areas, this year, we have added more comparison tables to the MD&A showing major variances in dollars and percent. Financial Highlights Assets of the City of Marshalltown (Primary Government) exceeded its liabilities at the close of the most recent fiscal year by $48,464,739(net assets) as compared to $47,215,837 in the prior year. The City s total net assets increased by $1,248,902. This increase is attributable to the completion of the public works facility and the biosolids project at the water pollution control plant. Other factors included the creation of the storm sewer user fee, additional federal grants for transit and the aquatic center experiencing a full year of receipts. As of the close of the current fiscal year, the City of Marshalltown s governmental funds reported combined ending fund balances of $9,515,814, a decrease of $1,148,672 in comparison with the prior year. This draw down can be contributed primarily to the Linn Creek dredging project, payment of the Center Street widening project and Westown Apartments. (See transmittal letter for more details on these projects.) $5,169,645, a decrease of $18,614 over last year s ending balance is available for spending at the City s discretion (unreserved undesignated fund balance). At the end of the current fiscal year, the unreserved undesignated fund balance for the general fund was $362,192, a decrease of $70,465. The City s total debt increased by $3,402,083 during the current fiscal year. This change results from the retirement and refinancing of bonds due to good market conditions and the purchase of $2,000,000 in General Obligation bonds for the Westwood Drive project and the Public Works facility note for $925,000. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the City of Marshalltown s basic financial statements. The City of Marshalltown s basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Beginning with the year ended June 30, 2003, the City of Marshalltown adopted the provisions of Governmental Accounting Standards Board Statements No. 34, Basic Financial Statements Managements discussion and Analysis for State and Local Governments, Statement No. 37, Basic Financial Statements-and Management s Discussion and Analysis For State and Local Governments: Omnibus, Statement No. 38, Certain Financial Statement Note Disclosures and Interpretation No. 6 Recognition and Measurement of Certain Liabilities and Expenditures in Governmental Fund Financial Statements. Comparative data for the year is now available for a comprehensive discussion of the City of Marshalltown s change in net assets. Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the City of Marshalltown s finances, in a manner similar to a private-sector business. 14

21 The statement of activities presents information showing how the City s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). Both of the government-wide financial statements distinguish functions of the City of Marshalltown that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City of Marshalltown include general government, public safety, public works (roads, utilities and traffic controls), health and social services, parks and recreation, library and employee insurance. The business-type activities of the City of Marshalltown include, compost, concessions, storm sewer, water pollution control and transportation activities. The government-wide financial statements include not only the City of Marshalltown itself (known as the primary government), but also a legally separate Water Works and Convention and Visitors Bureau for which the City of Marshalltown is financially accountable. Financial information for these component units is reported separately from the financial information presented for the primary government. The government-wide financial statements can be found on pages of this report. Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City of Marshalltown, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City of Marshalltown can be divided into three categories: governmental funds, proprietary funds and fiduciary funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the city s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City of Marshalltown maintains 15 individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures and changes in fund balances for the General Fund, Road Use Tax Fund, HUD Programs Fund, Local Option Sales Tax Fund, Property Tax Fund, Debt Service Fund and Public Works and Other Projects Fund, all of which are considered to be major funds. Data from the other seven non-major governmental funds are combined into a single, aggregated presentation in the governmental funds financial statements. Individual fund data on each of these non-major governmental funds is provided in the form of combining statements elsewhere in this report. 15

22 The City of Marshalltown adopts an annual appropriated budget for all funds as required by state statute. In Iowa, budgetary compliance is at the function level, transcending fund level accounting as demonstrated in this report. Budgetary comparison statements have been provided for the general fund and each major special revenue fund for the reader to demonstrate compliance with the adopted budget at this abbreviated level. The basic governmental fund financial statements can be found on pages of this report. Proprietary funds. The City of Marshalltown maintains two different types of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City of Marshalltown uses enterprise funds to account for its Storm Sewer, Wastewater, Compost, Transit and Concession activities. Internal service funds are an accounting devise used to accumulate and allocate costs internally among the City of Marshalltown s various functions. The City of Marshalltown uses internal service funds to account for its insurance operations. Because these services predominantly benefit governmental rather than business-type functions, they have been included within governmental activities in the government-wide financial statements. Individual fund data for the internal service funds are provided in the form of combining statements elsewhere in this report. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for the Storm Sewer, Wastewater and Other Proprietary funds, namely, Compost, Transit and Concession activities, all of which are not considered to be major funds of the City. The basic proprietary fund financial statements can be found on pages of this report. Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not available to support the City of Marshalltown s own programs. The most significant fiduciary fund maintained by the City of Marshalltown is the Payroll Fund which records the accounting for payroll and associated liability payments. The accounting used for fiduciary funds is much like that used for governmental funds. The basic fiduciary fund financial statements can be found on pages 40 and 41 of this report. Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages of this report. Other information. The combining statements referred to earlier in connection with non-major governmental and proprietary funds is presented immediately following the required supplementary information. Combining and individual fund statements and schedules can be found on pages of this report. Government-wide Financial Analysis As noted earlier, net assets may serve over time as a useful indicator of a government s financial position. In the case of the City of Marshalltown, assets exceeded liabilities by $1,248,902 at the close of the most recent fiscal year. By far, the largest portion of the City of Marshalltown s net assets $35,165,843 (73 percent) reflect its investment in capital assets (e.g., land, buildings, machinery, equipment, and infrastructure), less depreciation and any related debt used to acquire those assets that is still outstanding. The City of Marshalltown used these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City of Marshalltown s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other resources, since the capital assets themselves cannot be used to liquidate these liabilities. 16

23 CITY OF MARSHALLTOWN NET ASSETS June 30, 2004 Governmental Activities Increase/(Decrease) /2003 Current and other assets $18,560,480 $20,332,029 $ (1,771,549) Capital assets 31,844,725 36,858,577 (5,013,852) Total Assets 50,405,205 57,190,606 (6,785,401) Long-term liabilities Outstanding 25,386,806 24,102,812 1,283,994 Current and other liabilities 8,420,133 9,178,500 (758,367) Total Liabilities 33,806,939 33,281, ,627 Net assets: Invested in capital assets, Net of related debt 7,585,973 14,182,084 (6,596,111) Restricted 976,110 2,408,818 (1,432,708) Unrestricted 8,036,183 7,318,392 _ 717,791 Total Net assets 16,598,266 23,909,294 (7,311,028) ========= ========= ========= Business-type Activities Increase/(Decrease) /2003 Current and other assets $ 5,080,199 $5,819,556 (739,357) Capital assets 35,722,508 24,926,938 10,795,570 Total Assets 40,802,707 30,746,494 10,056,213 Long-term liabilities Outstanding 8,306,528 6,198,412 2,108,116 Current and other liabilities 629,706 1,241,539 (611,833) Total Liabilities 8,936,234 7,439,951 1,496,283 Net assets: Invested in capital assets, Net of related debt 27,579,870 18,870,233 8,709,637 Restricted 1,424,373 1,625,224 ( 200,851) Unrestricted 2,862,230 2,811,086 51,144 Total Net assets 31,866,473 23,306,543 8,559,930 ========= ========= ======== Total Net Activities Increases/(Decrease /2003 Current and other assets $23,640,679 26,151,585 (2,510,906) Capital assets 67,567,233 61,785,515 5,781,718 Total Assets 91,207,912 87,937,100 3,270,812 Long-term liabilities Outstanding 33,693,334 30,301,224 3,392,110 Current and other liabilities 9,049,839 10,420,039 (1,370,200) Total Liabilities 42,743,173 40,721,263 2,021,910 Net assets: Invested in capital assets, Net of related debt 35,165,843 33,052,317 2,113,526 Restricted 2,400,483 4,034,042 (1,633,559) Unrestricted 10,898,413 10,129, ,935 Total Net assets 48,464,739 47,215,837 1,248,902 ========= ========= ======== 17

24 A portion of the City of Marshalltown s activities net assets ($2,400,483) represents resources that are subject to external restrictions on how they may be used. Prior year comparison shows $4,034,042, a reduction of $1,633,559. The remaining balance of unrestricted net assets ($10,898,413) may be used to meet the government s ongoing obligations to citizens and creditors. This is a slight increase in available net assets over At the end of the current fiscal year, the City of Marshalltown is able to report positive balances in all three categories of net assets, both for the government as a whole, as well as for its separate governmental and business-type activities. The loss in governmental net assets is attributable to the transfer of assets for the creation of the Storm Water Utility (a business type activity). The following is a more detailed review of the years operation. City of Marshalltown s Changes in Net Assets Governmental Activities Increase/(Decrease) Revenues: /2003 Program Revenues: Charges for services $ 1,851,805 $ 1,402,801 $ 449,004 Operating grants and contributions 5,510,052 4,887, ,589 Capital grants and contributions 517, ,162 (179,866) General Revenues: Property and other taxes 11,480,381 11,515,111 (34,730) Grants and contributions not restricted to specific programs 415, ,838 (510,078) Other 708, ,622 (134,515) Total revenues 20,483,401 20,270, ,404 Expenses: Public Safety 7,334,477 6,704, ,636 Public Works 4,132,829 4,067,481 65,348 Health and Social Services 783, , ,569 Culture and Recreation 2,669,207 2,462, ,310 Community and Economic Development 2,495,685 1,744, ,961 General Government 1,038,353 1,083,663 (45,310) Interest on long term debt 984,214 1,137,323 (153,109) Total expenses 19,437,840 17,656,435 1,781,405 Increase (decrease) in net assets before transfers 1,045,561 2,614,562 (1,569,001) Transfers (8,356,589) (101,045) (8,255,544) Increase (decrease) in net assets (7,311,028) 2,513,517 (9,824,545) Net assets beginning of year 23,909,294 21,395,777 2,513,517 Net assets end of year 16,598,266 23,909,294 (7,311,028) ======== ========= ========= 18

25 Governmental Activities 2004 Revenues Grants & contributions not restricted to specific programs 2% Other 3% Charges for services 9% Operating grants and Contributions 27% Property and other taxes 56% Capital grants and contributions 3% Governmental Activities 2004 Expenses General government Community and 5% economic development 13% Interest on long term debt 5% Public safety 38% Culture and recreation 14% Health and social services 4% Public works 21% City of Marshalltown s Changes in Net Assets Business Type Activities Increase/(Decrease) Revenues: /2003 Program Revenues: Charges for services $ 4,116,953 $ 3,785,503 $ 331,450 Operating grants and contributions 198, ,399 13,131 Capital grants and contributions 472, ,479 (1,218) General Revenues: Other 88, ,525 (54,229) Total revenues 4,876,040 4,586, ,134 19

26 Expenses: Business type 4,672,699 4,151, ,694 Total expenses 4,672,699 4,151, ,694 Increase (decrease) in net assets before transfers 203, ,901 (232,560) Transfers 8,356, ,045 8,255,544 Increase (decrease) in net assets 8,559, ,946 8,022,984 Net assets beginning of year 23,306,543 22,769, ,946 Net assets end of year 31,866,473 23,306,543 8,559,930 ======== ======== ======== Business-type Activities Revenue Charges for services 31% Transfers 62% Other 1% Operating Grants and Contributions 2% Capital Grants and contributions 4% Business Type Activity Expenses 2004 Compost Facility 1% Transit & Paratransit 11% Storm Sewer 9% Recreation Concession 1% Water Pollution Control 78% 20

27 City of Marshalltown s Changes in Net Assets Total Governmental & Business-type Activities Total Total Increase/(Decrease) Activities Activities 2004/2003 Revenues: Program Revenues: Charges for services $5,968,758 $ 5,188,304 $ 780,454 Operating grants and contributions 5,708,582 5,072, ,720 Capital grants and contributions 989,557 1,170,641 (181,084) General Revenues: Property and other taxes 11,480,381 11,515,111 (34,730) Grants and contributions not restricted to specific programs 415, ,838 (510,078) Other 796, ,147 (188,744) Total revenues 25,359,441 24,857, ,538 Expenses: Public Safety 7,334,477 6,704, ,636 Public Works 4,132,829 4,067,481 65,348 Health and Social Services 783, , ,569 Culture and Recreation 2,669,207 2,462, ,310 Community and Economic Development 2,495,685 1,744, ,961 General Government 1,038,353 1,083,663 (45,310) Interest on long term debt 984,214 1,137,323 (153,109) Business type 4,672,699 4,151, ,694 Total expenses 24,110,539 21,807,440 2,303,099 Increase (decrease) in net assets before transfers 1,248,902 3,050,463 (1,801,561) Net assets beginning of year 47,215,837 44,165,374 3,050,463 Net assets end of year 48,464,739 47,215,837 1,248,902 ======== ======== ======== Financial Analysis of the Government s Funds As noted earlier, the City of Marshalltown uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds. The financial reporting focus of the City of Marshalltown s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information may be useful in assessing the City of Marshalltown s financing requirements. In particular, unreserved fund balance may serve as useful measure of a government s net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the City of Marshalltown s governmental funds reported a combined ending fund balance of $9,515,814, a decrease of $1,148,672 in comparison with the prior year. Of this total amount $8,143,188 constitutes unreserved fund balance, which is available to meet the future financial needs of the City. $1,945,290 is designated for future equipment and capital maintenance, future cash flow and landfill fees. The remainder of fund balance is reserved to indicate that it is not available for new spending because it has already been committed 1) to liquidate contracts and purchase orders of the prior period ($396,516), 2) to fund various debt service payments ($729,864), and 3) for a variety of other restricted purposes ($246,246). The general fund is the chief operating fund of the City of Marshalltown. At the end of the current fiscal year, unreserved fund balance of the general fund was $2,307,482. $432,128 has been designated by management for subsequent year s expenditures. The general fund s total fund balance was $2,625,062, an increase of $68,677 primarily as a result of the cash flow reserve fund deposits from the local option sales tax referendum. Another key factor in this slight increase includes the management s desire to stabilize budgeted expenditures (only a change of $3,455, less than one percent over 2003) to levels consistent with limited resource growth. 21

28 As a measure of the general fund s liquidity, it may be useful to compare both unreserved fund balance and total fund balance to total fund expenditures. Unreserved fund balance represents 22 percent of total general fund expenditures ($10,720,019), while total fund balance represents 25 percent of that same amount. This is approximately a 1% improvement over Proprietary funds. The City of Marshalltown s proprietary funds provides the same type of information found in the government-wide financial statements, but in more detail. The ending net assets for the proprietary funds was $31,866,473, a net asset increase of $8,559,930. This increase reflects the administrations reclassification of assets belonging to the newly created storm sewer utility. The unrestricted net assets of the five enterprise funds totaled $2,862,230, 67 percent of the total enterprise funds ($4,286,603) net assets, other than invested in capital assets net of related debt. Budgetary Highlights General Fund As demonstrated by the following schedule, the City continues to meet its responsibility for sound financial management. The City management acknowledged the City would have to hold the line on expenditures despite the impact of call ups to military duty and the continued cut back of state services. Revenues for the general fund operations, lagged budgeted revenues estimates by $224,633, and departmental expenditures on the budgetary basis were less than appropriated amounts by $943,693. The following schedule presents a summary of General Fund revenues and transfers in on the GAAP basis for the fiscal year ended June 30, 2004, and the amount and percentage of increases and decreases in relation to prior year revenues: Increase/ Percentage 2004 Percentage (Decrease) of Increase/ Revenues Amount of Total from 2003 (Decrease) Property taxes $ 4,246, % 140, % Other city taxes 972, % (161,627) -14.2% Licenses and permits 321, % (31,098) -8.8% Uses of money and property 118, % 7, % Intergovernmental 674, % (543,388) -44.6% Charges for services 913, % 219, % Other revenues 235, % (32,503) -12.1% Transfers In 3,390, % 469, % Total 10,873,007 68,659.6% 22

29 General Fund Revenues 2004 Transfers in 31% Property taxes 40% Other revenues 2% Charge for service Other city taxes 8% Intergovernmental 9% License and permits 6% 3% Use of money & property 1% Revenue and transfers in for general fund functions totaled $10,873,007 dollars (see Statement of Revenues, Expenditures and Change in Fund balances on page 33 of this report) in fiscal year ended June 30, Current and prior year s property taxes continue to represent the largest revenue source, with $4.2 million or 39.1% of all general fund revenues. The increase in property tax revenues from 2003 of $140,975 is due to a modest increase in the taxable value of real estate. There was no increase in tax rate for this fiscal year within the general fund. Anticipated service revenues at the new Aquatic Center carried the major increase in charges for services for the general fund. Additional revenue increases were realized in the area of building permits and tax abatement applications and police and fire service fees. In General Fund, a 45% percent decrease in state revenue sharing resulted in a $543,388 decrease in intergovernmental revenues. The revenue generated through the investment of idle funds also decreased. The following schedule represents a summary of General Fund expenditures and transfers out on the GAAP basis of accounting for the fiscal year ended June 30, 2004, and the percentage of increases and decreases in relation to prior year amounts: Increase/ Percentage 2004 Percentage (Decrease) of Increase/ Expenditures Amount of Total from 2003 (Decrease) Public Safety $ 6,027, % 76, % Public Works 1,394, % (106,615) -7.1% Health and Social Services 290, % (10,569) -3.5% Culture and Recreation 1,908, % 46, % Community & Economic Dev 115, % 26, % General Government 984, % (35,135) -3.4% Transfers Out 107, % 6, % Total 10,827,380 3,455.03% 23

30 Community & Economic Dev Culture and Recreation 1% 18% General Fund Expenses General Government 9% Transfers Out 2% Health and social services 3% Public Works 13% Public Safety 54% Negotiated wage increases of 3% were deferred for one year due to cut backs from the state. Benefit and utility expenses are responsible for some expenditure increases across all functions. Current cash flow projections and the management s stability of the City s general fund balance provide continued assurance that the City s need to enter the short-term debt market to pay for current expenditures remains remote. Enterprise Operations The City s enterprise operations consists of five separately accounted for operations which are administered by three different departments. Transit and the Compost facility are operated by the Public Works Department, Concessions is administered by Parks & Recreation and Storm Water and Water Pollution Control are administered by the WPC department. Last year, the City negotiated a note with the Department of Natural Resources for $4.36 million to rehabilitate the Bio-Solids Digesters at the Water Pollution Control Plant. Additionally, $1.8 was used from the WPCP capital maintenance fund for the City s share of the $6.1 million project. Due to favorable market conditions, the City also redeemed revenue bonds using funds on hand. The Council has committed to continue the redeemed bonds retirement schedule to reimburse the capital improvement fund for the funds advanced as well as a reasonable interest earnings. Operating revenues for the City s combined enterprise operations increased by $322,396 Transit revenues, however, were down due to cut backs in state and federal operating grants. Total operating expenses for the combined enterprise operations increased $470,600. The 13% increase was due primarily to group health benefits and utilities in all areas. Capital Asset and Debt Administration Capital assets. The City of Marshalltown s investment in capital assets for its governmental and business type activities as of June 30, 2004 amounts to $100,562,039. This investment in capital assets includes land, land improvements, buildings, machinery and equipment, park facilities, roads, highways and sewers. The total increase in the City of Marshalltown s investment in capital assets for the current fiscal year was $8,280,319 (governmental activities showed a net loss of $5,187,827and an increase of $13,468,146 in the business-type activities. This includes the transfer of assets for the newly created storm sewer utility from the governmental activities.) 24

31 City of Marshalltown s 2004 Capital Assets Governmental Activities Increase/Decrease Land and Improvements 3,415,798 3,420,835 ( 5,037) Buildings and Structures 7,512,989 5,465,029 2,047,960 Machinery and Equipment 11,427,097 11,410,272 16,825 Infrastructure 22,131,892 31,475,212 (9,343,320) Construction in Progress 4,536,710 2,440,965 2,095,745 Total 49,024,486 54,212,313 (5,187,827) ========== =========== ======== City of Marshalltown s 2004 Capital Assets Business type Activities Increase/Decrease Land and Improvements 2,302,852 2,192, ,234 Buildings and Structures 6,819,293 6,186, ,505 Machinery and Equipment 11,420,856 11,569,151 (148,295) Infrastructure 24,582,771 14,592,443 9,990,328 Construction in Progress 6,411,781 3,528,407 2,883,374 Total 51,537,553 38,069,407 13,468,146 ========== =========== ======== City of Marshalltown s 2004 Capital Assets Governmental and Business type Activities Increase/Decrease Land and Improvements 5,718,650 5,613, ,197 Buildings and Structures 14,332,282 11,651,817 2,680,465 Machinery and Equipment 22,847,953 22,979,423 (131,470) Infrastructure 46,714,663 46,067, ,008 Construction in Progress 10,948,491 5,969,372 4,979,119 Total 100,562,039 92,281,720 8,280,319 ========== ========= ======== Major capital asset events during the current fiscal year included the following: The City is in the midst of a multi-year street improvement on Westwood Drive. Completion of the Public Works facility. A variety of capital improvement projects were completed at the Marshalltown Airport. The Bio-Solids improvement project at the Water Pollution Control plant. Additional information on the City of Marshalltown s capital assets can be found in Note 5 on pages of this report. Long-term debt. At the end of the current fiscal year, the City of Marshalltown had total bonded debt outstanding of $32,585,826. Of this amount, $18,995,000 comprises debt backed by the full faith and credit of the city. The remainder of the City of Marshalltown s debt represents bonds secured solely by revenues generated from the sanitary sewer rental fees or revenues generated by tax increment. 25

32 City of Marshalltown s Outstanding Debt General Obligation and Revenue Bonds (Stated in 1,000 s) Governmental Activities Increase/Decrease /2003 General obligation bonds $ 18,995 $ 18,435 $ 560 and notes payable Revenue bonds 5,448 4, Total 24,443 23,127 1,316 ======= ======= ==== Business type Activities Increase/Decrease /2003 General obligation bonds $ And notes payable Revenue bonds 8,143 6,056 2,087 Total 8,143 6,056 2,087 ======= ======= ==== Total Governmental and Business type Activities Increase/Decrease /2003 General obligation bonds $ 18,995 $ 18,435 $ 560 Revenue bonds 13,591 10,748 2,843 Total 32,586 29,183 3,403 ======= ======= ==== The City of Marshalltown s total bonded debt increased by 11.7% percent during the current fiscal year. The government refinanced some of its existing debt to take advantage of favorable interest rates. The City of Marshalltown issued a $2 million general obligation note for the Westwood Drive Street project The City of Marshalltown issued a tax increment note with $925,000 still outstanding at year end The state revolving loan for the Water Pollution Control plant project has drawn down a total of $4,122,638 The City of Marshalltown s bond rating of A2 was retained by Moody s for its general obligation and revenue bonds in March of State statues limit the amount of general obligation debt a governmental entity may issue to 5 percent of its total assessed valuation. The current debt limitation for the City of Marshalltown is $47,500,790 which is significantly in excess of the City of Marshalltown s outstanding general obligation debt. Additional information on the City of Marshalltown s long-term debt can be found in note 6 on pages of this report. 26

33 Economic Factors and Next Year s Budgets and Rates Marshalltown continues to be a viable economic center for central Iowa. The local economy of the City remains strong. We continue to experience consistent growth from housing starts and the Main Street business district. Refer to the transmittal letter for more information on the economic factors, initiatives and general activity of the fiscal year. In adopting the budget for the ensuing fiscal year 2005, the City officials considered many factors in making decisions and estimates about the finances of the upcoming year. Interest earnings and sales taxes collected by the state indicated reduced levels of resource certainty. The statewide police and fire retirement system increased the city s contribution by more than three percent to offset reduced interest earnings and contributions from the State. Only a few capital projects are scheduled due to the anticipation of completing a number of large multi year projects currently under construction. A primary objective of the Council was to continue to provide basic city services to the citizens while attempting to keep the property tax rate substantially the same. Other concerns in the forefront of revenue and expenditures projections include: the State s looming budget deficits, state economists continue to predict budget deficits uncertain projections for utility tax replacement now that the three year hold harmless has expired and the utility company has won their assessment appeal the high cost of lumber and steel curbing enthusiasm for construction a continued decline in rates of return on investments another increase in City contribution rate for Police and Fire retirement system, with rumors of an increase for the IPERS covered employees as well cash balances were used to minimize the increase in taxes, additional expenses for retirement programs may require additional tax askings the cost of health care continues to rise. Cost containment and changes in the City s plan have held 2005 increases to less than 5% increase Requests for Information This financial report is designed to provide a general overview of the City of Marshalltown s finances for all those with an interest in the government s finances. Questions concerning any of the information provided in this report, or requests for additional financial information should be addressed to the Office of the Finance Director, 24 N. Center Street, Marshalltown, IA

34 STATEMENT OF NET ASSETS AS OF JUNE 30, 2004 Primary Government Component Units Marshalltown Marshalltown Governmental Business-type Water Convention and Activities Activities Total Works Visitors Bureau ASSETS Cash and cash equivalents $ 9,793,691 $ 3,142,479 $ 12,936,170 $ 1,720,967 $ 44,263 Receivables Property taxes Delinquent 91,725-91, Succeeding year 7,013,159-7,013, Accounts and unbilled usage 161, , , ,646 - Interest ,824 - Internal balances 9,129 (9,129) Due from component unit 13, , , Due from other governments 989,053 15,485 1,004, Inventories - 24,897 24, Prepaid items 400,169 79, ,557 69,568 1,304 Deferred charges Bond issuance costs 83,131 28, ,369 5,978 - Deferred amount on refunding - 17,525 17, Bond discount 4,948 20,035 24, Restricted assets Cash and cash equivalents - 888, , ,113 - Capital assets Land 2,748, ,856 3,236,485 1,113,171 - Land improvements 667,169 1,814,996 2,482, Buildings and structures 7,512,989 6,819,293 14,332,282 8,550,565 - Equipment and vehicles 11,427,097 11,420,856 22,847,953 2,088,224 69,153 Sanitary sewers and lift stations - 14,728,755 14,728,755 8,240,947 - Infrastructure 22,131,892 9,854,016 31,985, Construction in progress 4,536,710 6,411,781 10,948, Accumulated depreciation (17,179,761) (15,815,045) (32,994,806) (8,230,148) (65,579) Total assets 50,405,205 40,802,707 91,207,912 13,927,298 49,141 (continued) 28

35 STATEMENT OF NET ASSETS (continued) AS OF JUNE 30, 2004 Primary Government Component Units Marshalltown Marshalltown Governmental Business-type Water Convention and Activities Activities Total Works Visitors Bureau LIABILITIES Accounts payable $ 613,249 $ 253,444 $ 866,693 $ 38,785 $ 980 Accrued payroll and payroll benefits 393,971 67, ,727 47,227 2,202 Retainage payable 166, , , Deferred revenue Succeeding year property tax 7,013,159-7,013, Other 30,187-30, Premium on bonds sold 11,986-11, Due to other governments 88,316 14, , Accrued interest payable 102,754 23, , Due to primary government ,603 - Liabilities payable from restricted assets Customer deposits ,025 - Noncurrent liabilities Due within one year Bonds and notes payable 1,290, ,000 2,002, ,000 - Urban renewal tax increment revenue bonds and notes payable 110, , Compensated absences payable 530,054 56, ,149 71,326 - Due in more than one year Bonds and notes payable 17,705,000 7,430,638 25,135,638 1,040,000 - Urban renewal tax increment revenue bonds and notes payable 5,337,288-5,337, Compensated absences payable 413, , , Total liabilities 33,806,939 8,936,234 42,743,173 1,885,054 3,182 NET ASSETS Invested in capital assets, net of related debt 7,585,973 27,579,870 35,165,843 10,402,324 3,574 Restricted for Capital projects 8, , , Improvements - 250, , Community and economic development 235, , Debt service 729, ,253 1,368, ,685 - Parks, nonexpendable 2,323-2, Unrestricted 8,036,183 2,862,230 10,898,413 1,259,235 42,385 Total net assets $ 16,598,266 $ 31,866,473 $ 48,464,739 $ 12,042,244 $ 45,959 See notes to financial statements. 29

36 STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2004 Program Revenues Operating Capital Charges for Grants and Grants and Functions/Programs Expenses Services Contributions Contributions Primary government Governmental activities Public safety $ 7,334,477 $ 172,460 $ 598,905 $ 24,185 Public works 4,132, ,004 2,238, ,111 Health and social services 783,075 12, ,130 - Culture and recreation 2,669, , ,904 - Community and economic development 2,495, ,422 1,642,552 - General government 1,038, , Interest on long-term debt 984, Total governmental activities 19,437,840 1,851,805 5,510, ,296 Business-type activities Storm sewer 408, , ,559 Water pollution control 3,677,871 3,593,272 13,660 33,926 Compost 35,357 41, Concessions 58,824 71, Transit 492, , , ,776 Total business-type activities 4,672,699 4,116, , ,261 Total primary government $ 24,110,539 $ 5,968,758 $ 5,708,582 $ 989,557 Component units Water works $ 2,733,399 $ 3,264,121 $ - $ - Convention and tourism 160, , Total component units $ 2,894,145 $ 3,406,149 $ - $ - General Revenues Taxes Property Other State generated revenues Unrestricted investment earnings Miscellaneous revenues Transfers Total general revenues and transfers Change in net assets Net assets - beginning Net assets - ending See notes to financial statements.